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Independent Film Finance – A Primer – Part Four – Crowd Funding

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Independent Film Finance – A Primer – Part Four – Crowd Funding image KC Poster 202x3001Have you received emails or Facebook messages from people you know asking you to “support” them by donating money to their film (or other project) on Kickstarter? Or IndieGoGo? Or another crowd funding platform? Or do you follow someone or something on Twitter and see plenty of tweets asking for your support?

If you haven’t yet, you will.

At first, these types of requests were exciting and novel. As the deluge ramped up, though, a lot of people started to tune out others asking for money, despite the “rewards” like t shirts, signed scripts, and head shots of the stars.

But, it is one way to raise some money, and worth trying.

Here’s an article from JohnAugust.com that cites what Kickstarter co-founder Yancey Strickler sees from his position – what works when raising crowd sourcing drives and what does not. The article is from 2011, so things may have changed completely in the last 18 months, but I doubt it.

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What has changed, or is changing, is the potential for small equity stakes in films purchased through Kickstarter or other platforms. The JOBS Act has lifted some of the restrictions on who a producer can ask for money, and how much he or she can ask for.

In the past, you couldn’t approach anyone who was not an accredited investor (someone making at least $200,000 per year, or with a net worth exclusive of their residence of over $1,000,000). You also could approach only a limited number of people lest your private placement become a public offering.

But that should all change, once the Securities And Exchange Commission revises their old rules per the Act.

Upside – I, and many like me, are much more likely to kick in some cash for a film project if I can participate in potential profits – an investment is more incentive than a t shirt.

Downside – With deregulation can often come fraud. Many groups, including the AARP, have opposed this Act due to the danger of shady people using these offerings to fleece the more susceptible amongst us. (Think: Set up a shell company, advertise and sell shares, take the money, shut down the company as a failure and complete loss, investors get nothing back and have no recourse.)

Some people believe that crowd funding for indie film is going to explode in 2013 because of these changes. Some also think that it will be tainted once the first big fraud comes out, and then implode. Who knows exactly what will happen, but if you are going to try to raise money as an investment in your film via crowd funding, I’d advise you launch your campaign as soon as the new rules go live (just in case that fraud does hit and no one is willing to invest in any crowd funding offerings any longer).

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